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The global oil market is currently experiencing an uptick, with brent crude prices hovering above the $84-per-barrel mark, a slight increase of 0.8% from the last trading session. The West Texas Intermediate (WTI) crude also witnessed a 0.9% rise, trading above the $80-per-barrel threshold. This upward trend in oil prices is fostering a bullish atmosphere, paving the way for heightened exploration and production activities, particularly in lucrative shale reserves.
Oil Price Still Remains High
At present, the WTI crude price is trading above $80 per barrel, which is deemed highly beneficial for the exploration and production sector. The U.S. Energy Information Administration’s (“EIA”) short-term energy outlook remains optimistic, projecting an average spot price of $82.15 per barrel for WTI crude for 2024. The current dynamics in the global oil market, characterized by rising prices, robust demand and constrained supply, are setting the stage for an expansion in the upstream sector.
What Led to the Rise in Oil Prices?
The driving force behind the soaring oil prices can be traced to the recent revisions in the EIA’s Short-Term Energy Outlook. Initially, the EIA projected a modest increase in U.S. oil production, anticipating an addition of 170,000 barrels per day (bpd). However, the outlook has been adjusted to forecast more robust growth of 260,000 bpd, culminating in a total daily production of 13.19 million barrels.
Contrary to expectations, this significant upward revision in production forecasts did not exert bearish pressure on oil prices. Instead, the EIA highlighted the ongoing production constraints by the Organization of the Petroleum Exporting Countries, coupled with a strengthening demand. These factors are anticipated to contribute to a tighter oil market, commencing as early as the second quarter of the year.
Further buoying the oil market, the American Petroleum Institute’s inventory estimates indicate a favorable scenario, leading to a subsequent 2% rise in oil futures. This increase is further amplified by market anticipation of potential rate cuts by the Federal Reserve by the summer.
3 Stocks to Buy
Given the backdrop, it is prudent to allocate money toward oil exploration and production companies. We are employing our proprietary Stock Screener to zero in on three stocks belonging to the spaces that are well-poised to gain. The three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Solid oil prices significantly benefit Matador Resources Company (MTDR - Free Report) , a company with a robust presence in the oil-abundant core areas of the Wolfcamp and Bone Spring plays in the Delaware Basin. Such favorable oil prices are expected to support the company in boosting its production volumes.
For 2024, Matador projects its average daily oil equivalent production between 153,000 and 159,000 barrels of oil equivalent per day (BOE/d), implying an 18% increase from the previous year. Oil constitutes the majority of Matador’s production, accounting for 57% of its total output in the fourth quarter of 2023, making the commodity's price a crucial determinant of the company's earnings.
Marathon Oil Corporation (MRO - Free Report) focuses its oil and gas operations primarily in the United States (notably in Oklahoma, Eagle Ford, Bakken and Northern Delaware) and Equatorial Guinea. The company's wells, characterized by extremely low breakeven costs for oil prices, require just $35 per barrel to achieve profitability.
Marathon Oil's outlook for 2024 indicates a strategy to maintain stable total company oil production. This Texas-based energy explorer reported a total net production of 404,000 BOE/d in the fourth quarter of 2023, up from 333,000 BOE/d in the same period of the previous year.
Magnolia Oil & Gas (MGY - Free Report) targets operational efforts on the oil-rich Karnes County acreage, located at the heart of the Eagle Ford shale, one of the United States' most prolific regions. This area is renowned for its favorable economics, leading industry breakeven points and rapid investment returns.
In 2023, Magnolia's production from this area averaged 82.3 thousand BOE/d, reflecting a 9.3% year-over-year increase. Oil and gas production rose 15.8% in the fourth quarter from the same period in 2022, with oil volumes reaching 35,466 bpd, marking a 9.8% increase.
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Healthy Crude Oil Prices Fuel Upstream Sector Expansion
The global oil market is currently experiencing an uptick, with brent crude prices hovering above the $84-per-barrel mark, a slight increase of 0.8% from the last trading session. The West Texas Intermediate (WTI) crude also witnessed a 0.9% rise, trading above the $80-per-barrel threshold. This upward trend in oil prices is fostering a bullish atmosphere, paving the way for heightened exploration and production activities, particularly in lucrative shale reserves.
Oil Price Still Remains High
At present, the WTI crude price is trading above $80 per barrel, which is deemed highly beneficial for the exploration and production sector. The U.S. Energy Information Administration’s (“EIA”) short-term energy outlook remains optimistic, projecting an average spot price of $82.15 per barrel for WTI crude for 2024. The current dynamics in the global oil market, characterized by rising prices, robust demand and constrained supply, are setting the stage for an expansion in the upstream sector.
What Led to the Rise in Oil Prices?
The driving force behind the soaring oil prices can be traced to the recent revisions in the EIA’s Short-Term Energy Outlook. Initially, the EIA projected a modest increase in U.S. oil production, anticipating an addition of 170,000 barrels per day (bpd). However, the outlook has been adjusted to forecast more robust growth of 260,000 bpd, culminating in a total daily production of 13.19 million barrels.
Contrary to expectations, this significant upward revision in production forecasts did not exert bearish pressure on oil prices. Instead, the EIA highlighted the ongoing production constraints by the Organization of the Petroleum Exporting Countries, coupled with a strengthening demand. These factors are anticipated to contribute to a tighter oil market, commencing as early as the second quarter of the year.
Further buoying the oil market, the American Petroleum Institute’s inventory estimates indicate a favorable scenario, leading to a subsequent 2% rise in oil futures. This increase is further amplified by market anticipation of potential rate cuts by the Federal Reserve by the summer.
3 Stocks to Buy
Given the backdrop, it is prudent to allocate money toward oil exploration and production companies. We are employing our proprietary Stock Screener to zero in on three stocks belonging to the spaces that are well-poised to gain. The three stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Solid oil prices significantly benefit Matador Resources Company (MTDR - Free Report) , a company with a robust presence in the oil-abundant core areas of the Wolfcamp and Bone Spring plays in the Delaware Basin. Such favorable oil prices are expected to support the company in boosting its production volumes.
For 2024, Matador projects its average daily oil equivalent production between 153,000 and 159,000 barrels of oil equivalent per day (BOE/d), implying an 18% increase from the previous year. Oil constitutes the majority of Matador’s production, accounting for 57% of its total output in the fourth quarter of 2023, making the commodity's price a crucial determinant of the company's earnings.
Marathon Oil Corporation (MRO - Free Report) focuses its oil and gas operations primarily in the United States (notably in Oklahoma, Eagle Ford, Bakken and Northern Delaware) and Equatorial Guinea. The company's wells, characterized by extremely low breakeven costs for oil prices, require just $35 per barrel to achieve profitability.
Marathon Oil's outlook for 2024 indicates a strategy to maintain stable total company oil production. This Texas-based energy explorer reported a total net production of 404,000 BOE/d in the fourth quarter of 2023, up from 333,000 BOE/d in the same period of the previous year.
Magnolia Oil & Gas (MGY - Free Report) targets operational efforts on the oil-rich Karnes County acreage, located at the heart of the Eagle Ford shale, one of the United States' most prolific regions. This area is renowned for its favorable economics, leading industry breakeven points and rapid investment returns.
In 2023, Magnolia's production from this area averaged 82.3 thousand BOE/d, reflecting a 9.3% year-over-year increase. Oil and gas production rose 15.8% in the fourth quarter from the same period in 2022, with oil volumes reaching 35,466 bpd, marking a 9.8% increase.